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> why would big banks not want to compete against SVB by establishing a smaller division that handles startups?

Because such startups tend to, when they can’t raise funds easily (=nowadays), withdraw all their cash deposits at the same time (=what’s happening at SVB), which puts it in bankrupt. So, small market, but so much variance in deposits that it’s risky.

Bank of America couldn't care less about our XX million/year revenues. Literally wouldn't take even basic requests for services. We moved to Keybank who has a much better rep with small businesses, and service (and pricing) has been orders of magnitude better.

I'm assuming a similar thing was going on with SVB vs. other large banks.

If the deposits are going on the parent bank's balance sheet, it would be subject to the same controls.